BP is cutting spending on new projects after suffering a 62% drop in profits following the slump in the oil price.

The energy giant reported this morning that it made a profit of $2.387bn (£1.64bn) in the first three months of this year, down from $6.231bn a year ago. It blamed the fall in the price of oil, which fluctuated between $35 and $50 a barrel during the quarter, while a year ago a barrel cost more than $100.

With profits also lower than in the last three months of 2008, when BP made $2.587bn, the company is now planning to spend less on finding and developing new oil and gas reserves. It warned today that it will spend less than $20bn on capital expenditure this year, down from an earlier target of $20bn-$22bn. This comes after Opec, the group of oil-producing nations, threatened to cut production unless the oil price rose soon.

The cut in capital expenditure could have long-term consequences for BP's future growth. It is not clear which projects will be affected by the cutbacks, but environmentalists are likely to welcome the move, given the controversy over projects such as the tar sands scheme in Canada.

The move comes less than a month after BP said it will reduce the headcount at its solar power division by 620, or nearly a quarter, in a cost-cutting drive.

BP today also reported a drop in sales at its solar division, which makes solar panels. Its sales during the quarter would generate 15 megawatts of power, down from 34 MW in the same period in 2008. BP said this reflected "ongoing weak demand in the market".

Shareholders will receive a dividend of 14 cents per share, the same as in the last quarter and nearly half a cent more than a year ago.